When a Low Interest Rate Doesn’t Really Matter

When you are looking to get a new credit card, one of the first things that you are going to look for is a low interest rate. Everyone is basically aware that a low interest rate is an important criterion for a good credit card because it generally reduces the amount of money that you pay for borrowing funds on a credit card. While it’s certainly important to keep this in mind as you choose a credit card, it’s also important to be aware of the fact that there are times when the low interest rate on a credit card doesn’t really matter. Sometimes, there are going to be other benefits of a card that can outweigh the drawbacks of a higher interest rate so that you wouldn’t necessarily choose the low-interest card from the credit card options available to you.

The first thing to realize is that the interest rate on a credit card typically only matters if you are planning to carry a balance on the card. Many people make use of the credit card as a convenient method of making payments for daily expenditures while keeping monthly finances concisely organized. These people often pay off the credit card balance in full each month because they aren’t using the credit card to borrow money that they don’t have but are instead using the credit card to simplify their financial lives. Those people who are consistently going to pay off the entire balance of a credit card at the end of each billing cycle are people who really don’t need to worry about a low interest rate because they aren’t being charged interest anyway.

Another thing to realize when it comes to interest rates and choosing your credit cards is that the low interest rate is only valuable on big expenditures if it’s going to be a permanent or long-term low interest rate. For example, many people try to find a low interest rate on balance transfers so that they can consolidate a big chunk of debt into an easier-to-pay-off loan. In this case, the low interest rate is important but it’s only going to be useful if it lasts long enough to make it possible to pay off at least a large percentage of the consolidated loan before the low interest runs out. In other words, it’s nice to lower your interest rate from 15% to 10% but if the lower interest rate only lasts six months and then climbs to 20% then it probably wasn’t a good idea in the first place.

Finally, it’s important to realize that a low interest rate is only one critical factor that you’re going to want to look at when you are assessing the credit card that is right for you. You’re going to sometimes find that the other benefits of a card may outweigh the fact that it has a higher interest rate than other choices, a fact which may depend upon your particular spending style. For example, let’s say that you don’t carry a very high balance on your credit cards but you tend to be disorganized with your finances and often incur late fees. A credit card without late fee penalties might be a good choice even if it has a higher interest rate than other cards that you’re considering using. Weighing factors in addition to low interest rates is important when selecting a credit card for regular use.